Microsoft is clearly hoping for a bit of the same magic. The company
arguably has the most innovative interface on any smartphone
on the market today. While RIM, Apple, and Google all rely on
chiclet-style app grids at the heart their GUI (Google, at least, adds animated
widgets to the homescreen), Windows Phone 7 offers a striking visual spectacle
of animated menus, most of which are timesaving and intuitive.

Microsoft announced this week that Windows Phone 7 moved 2 million licenses in Q4
2010. That's largely in line with what one might expect, as it indicates
that Microsoft sustained the sales pace indicated by previously released
figures. The platform launched on November 8, 2010 and within six weeks
(on December 20) had sold 1.5 million units.

Some were quick to jump on the sales, largely using analysts to hack away at
the platform. WritesBloomberg:

Microsoft Corp. said it shipped more than 2 million copies of the Windows
Phone 7 operating system last quarter, as the company tried to reverse sliding
smartphone market share...

The shipment figure isn’t all that rosy, said Kevin Burden, an analyst at ABI
Research.

"The number shows there’s a lot of competition in this space and Windows
Phone 7 is having a hard time being heard over the crowd," said Burden,
who is based in Hopkinton, Massachusetts.

Microsoft
defends itself. In an interview with All Things Digital's Mobilized blog, Microsoft
Senior Product Manager Greg Sullivan is quoted as saying, "We’re still in
the early stages. When people use this phone, they really, really like it. One
of the key ways that we’ll measure success of Windows Phone is did we ship a
phone people love."

He says that the 93 percent approval rating the platform enjoys by Microsoft's
accounting is proof of a successful mission. Windows Phone 7 users we
have interviewed do appear to echo this sort of positive response.
Virtually every Windows Phone 7 user we spoke to at CES (none of which
worked for Microsoft or a phone carrier) spoke glowingly of the platform.

But there's a lot more to this story, both good and bad that
is being largely overlooked.

First, Microsoft sales look more impressive, given that it is only currently
offered on AT&T and T-Mobile in the U.S. The good here is that sales
will obviously pick up when the new platform lands on America's largest
wireless network (Verizon). The bad news is that Microsoft set a slow schedule for the Verizon and Sprint
launches, with no concrete launch dates yet.

Second, like Android, Microsoft is pursuing an aggressive update schedule,
which should help it. It plans to deliver a pair of
major updates this spring, which will bring customers copy/paste
and multi-tasking. These updates will "catch it up" with its
competitors, so to speak. This is definitely a positive for Microsoft,
and should greatly help the platform's image.

A less than positive note, however, is the phantom
data problem. Microsoft claims the problem, in which phones
transmit large amounts of data (tens to hundreds of megabytes of data daily --
or more) is limited to a "single digit" percentage of users.
Yet it has failed to act responsibly and warn users, allowing them to
remove the offending program. It has also failed to provide users with
sufficient reassurances that they will not be charged with data overages.

Speculation is running wild about what the offending program may be, following
Microsoft identifying it as a third party solution. One
report accuses the HTC Hub of being responsible for the phantom
menace; others have accused Yahoo! Mail. Overall, this problem and
Microsoft's poor response are dual negative marks for the platform's image.

So with all this mix of good or bad, what is the outlook for the platform?
Well, ultimately Windows Phone 7 has an increasing array of handsets, and
its sales aren't that bad, so we expect the platform to survive and slowly gain
market share. Still, how fast it gains
market share is largely dependent on how well it delivers on platform updates
and whether it chooses to start acting responsibly about its platform's data
issues.

Update: Thur. 1/27/2011 2:50 p.m. -

We reached out to our Microsoft press contact for more information concerning some news networks' negative depiction of this sales data and update on the phantom data issue. While the spokesperson did not provide us with answers to our specific questions, as requested, they did offer us a general statement.

They emphasized the following metrics:

• Early research indicates 93% of customers worldwide are satisfied with Windows Phone 7, and 90% would recommend to others. • Developer engagement is excellent with customers getting access to an average of 100 new apps a day and more than 6,500 apps overall on Marketplace. • Over 2MM licenses sold to OEMs worldwide.

And they add, "Sales are an important measure of success, but for a new platform customer satisfaction and active developer investment can be even more important leading indicators of long-term success.These early signs of satisfaction from customers and developers are reason to be bullish about the foundation for long-term success for Windows Phone 7."

We will again, try to provide an update as soon as Microsoft offers more specifics on the data usage issues that are afflicting some WP7 users.

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